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If the Elasticity of Demand for Cigarettes Is 0

Question 61

Multiple Choice

If the elasticity of demand for cigarettes is 0.4, a seller should


A) Increase price to increase total revenue.
B) Decrease price to increase total revenue.
C) Reduce price to maximize profits.
D) Increase price because the percentage change in quantity demanded will be greater than the price effect. If price elasticity of demand is 0.4, then demand is very inelastic. That means the seller can increase price and increase total revenue.

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